(ThyBlackMan.com) Unless you live in the heart of a major city, you probably need access to a vehicle to get around—and even many urban dwellers keep a car, too. But a majority of Americans are unable to walk into the dealership, cash in hand, prepared to pay in full on the spot.
The reality is that most of us depend on a financing plan to pay gradually over time, usually over the course of two to six years. It’s a major purchase, and there’s absolutely no shame in needing to break the total price tag down into manageable monthly installments.
But you don’t have to wait until you walk into a dealership to start talking numbers, nor do you have to settle for financing at the interest rate they may offer you. Consumers can empower themselves by getting pre-approval for financing before they even start shopping.
What are the Benefits of Getting Pre-Approved?
Getting pre-approved is a savvy move for car shoppers because it helps them ensure they’re getting the best loan on the best terms for their financial situation. Instead of having to respond to whatever the dealership offers, you’ll be able to walk in knowing your options before you even fall in love with a car.
The first step is always assessing your own budget so you know what you can afford. Then you can start to “shop around” by exploring various sources of auto financing—like banks, credit unions and other types of lenders.
As the Consumer Financial Protection Bureau notes, getting preapproved will help you gather quotes with important information like interest rate, loan length and the maximum loan amount, “based on factors such as your creditworthiness, the terms of the loan and the type of vehicle you have in mind.”
Once you have quotes in hand, you can easily compare them to determine which one will serve you best. This includes comparing them to whatever financing the dealer offers you through the auto lenders with which they work.
Having too many options is always better than having too few. Getting pre-approved for auto financing from one or more lenders gives you the power of choice. It’s also a good motivator to get all your financial ducks in a row before setting foot in a dealership; instead of waiting until you find a car you love and feel rushed to act, you can make an informed decision based on the legwork you performed in advance.
How to Get Pre-Approved for Auto Financing
There’s no one correct way to get pre-approved; how you do so depends on your personal financial situation. If your credit score is good or excellent, you may have no problem getting pre-approval from a local credit union or bank. If you’re one of the many Americans with less-than-stellar credit, you’ve still got options. Lenders like RoadLoans can preapprove drivers for low-credit car loans when they apply online, allowing them to walk into any dealership confidently rather than expecting to hear the worst.
When you’re comparing various auto financing options, remember to consider factors like the Annual Percentage Rate (APR) and the loan duration. While auto loans can last as long as 84 months, it’s generally inadvisable to stretch it out so long, even if it makes the monthly payments lower. Why? Because you’ll pay more in finance charges over the life of the loan and take longer to build equity on the vehicle.
It helps to get pre-approved for vehicle financing because it gives you, the buyer, power. This way, you can walk into any dealership confident about the financial portion of the process because you already compared your options and chose the best one.
Staff Writer; Bobby Shaw